First Time Alabama Investor - neighborhood advice please!

[Tatjana Roth]

I am working with a turnkey provider and found a single family house (3 bed 2 bath) in Hueytown with numbers that makes sense. The house is bit dated; it appears to me that the turnkey provider bought at 100K, made minimal repairs and now selling at $165K. The rent would be $1295 and the cash ROI 8.5% ($291). The neighborhood comps seems reasonable and accurate, but I am worried about "negative equity" that I read so much about on BP. It's hard to grasp how you can go from $100K to $165 with such a basic cosmetic repairs.

My main concern, however, is that I know nothing about the neighborhood. I am told that the A B C D area ratings are very subjective and unreliable.  I do not know what Hueytown overall rating is.  I would really like to get a better idea what I am getting myself into. From what I understand, Hueytown is a small suburban city near Bessemer. Bessemer appears to be one of the most rough and dangerous cities in America. Is this true? So hard to determine from the web search. Also, the Birmingham is an hour away, which is too far for commuters.

Does anyone has experience with this neighborhood?  Any advice to the first timer would be greatly appreciated.  

[Jay Compton]

I know it can be difficult to research a market from a distance, but Hueytown is not one hour from Birmingham...it will typically take 15-20 minutes to get from downtown Hueytown to downtown Birmingham, and that's pretty much the normal for those of us that live and work around Birmingham and drive everyday to and from work...no matter which side of town you live on, we're all roughly within 30 minutes or less from being downtown, including Hueytown. This makes Hueytown a suburb of Birmingham...not Bessemer. Don't worry so much about Bessemer. It has it's problems, but they typically don't drift over into Hueytown. We have MUCH bigger problems with the eastern parts of town now than we do the western areas...Centerpoint mainly.

I've owned several homes over the years in Hueytown. I actually just tried to buy another one a few weeks ago on the courthouse steps (but these big rental companies have deeper pockets than I do). We've got a rental right next door in Pleasant Grove for $1,100/mo and it is NICE. We paid $27k for it 4 years ago and spent a little over $75k gutting and renovating it. I say all that to make a point...yours should be top of the market perfect to command $1295. They may have told you it's been rented for that number for awhile, but either ask to speak directly with the tenant, or ask to see corresponding deposits into an account where the tenant has actually paid that amount for the past six months. If they let you speak directly with the tenant (which they probably won't), have a defined list of questions that you want honest answers to ready for them. Offer to send the tenant a $100 Amazon card for their time...it might just save you $40k in the long run.

Now, on to the price of the house. They probably realistically did pay $100k for the house. I just watched that one on the courthouse steps sell for $105k a few weeks ago ($20k more than my last bid), so that seems to be the going rate out there now to buy a light renovation job, then spend $20k - $25k in repairs.

I personally think you can find a better deal than that. Spending $165k is towards the top end of Hueytown now, although it may not be 2 years from now...who knows. But $165k today can take you to a better side of town with better schools, and better tenants. Think Leeds, Moody, Odenville, McCalla, Warrior, Jasper, Pell City, Calera, etc...It sounds like you live out of state anyway, so you probably wouldn't care if it's a few more miles in the country away from downtown. We're not a big public transportation hub down here in the south, so everyone has cars and we drive everywhere...living a few more miles away from town, is just not as big of deal as it is in other parts of the country.

With all that being said though, if you can buy it for $130k....it's probably worth it.

Good Luck,

Jay